An Andreessen Horowitz-backed Company Tokenizes a $20 Million Student Residence

A new real estate company backed by investors including Andreessen Horowitz launched a token sale for a luxury student-housing complex near the University of South Carolina, Fortune reported on November 27, 2018.

Harbor Launches its First Securities Offering With Sale of $20 Million USC Residence

Luxury Student Residence “The Hub”

(Source: Fortune)

Investors in the U.S. can now acquire a piece of South Carolina’s real estate in the form of blockchain tokens, making it the first offering of its kind in the country. The tokens represent a proof of ownership in The Hub, a luxury student residence located near the University of South Carolina.

The sale will be launched by Harbor, a young company trying to get rid of the elbow grease that goes into real estate by using blockchain technology. Incubated by the former PayPal executive David Sacks and backed by investors including Andreessen Horowitz, Harbor will be partnering with Convexity Properties, the real-estate investment arm of the trading shop DRW.

Convexity Properties, the owner of the student-housing complex, plans to sell a minority interest in the building to raise at least $15 million. According to Business Insider, the company will be issuing 995 tokens to facilitate the sale, each one priced at $21,000.

The tokens will serve as a type of equity shares, giving investors fractional ownership of the property. Investors will also be able to purchase the tokens with U.S. dollars, bitcoin, and ether.

Blockchain and Real Estate are a Match Made in Heaven

Harbor’s sale is significant because it amounts to the first tokenized REIT in the U.S. This means the owner, Convexity Properties, is providing a traditional real estate investment but one that uses blockchain to parcel out stakes.

Harbor’s CEO Josh Stein told Fortune that blockchain was “superior” because it has fewer transactions costs than traditional property sales, which have to consider both lawyers’ fees and commissions made by the agents.

“Think of it like the transition from snail mail to email that occurred in offices in the 1990s. The content was the same but the digital format made it faster, cheaper, and easier to send,” he said.

Don Wilson, the CEO of Convexity Properties’ parent company DRW, said the firm chose the student residence as its first blockchain offering because it is an easy to understand investment. Stein echoed that statement, saying that the residence will be used as a template for other blockchain real estate sales in the future.

Harbor has partnered with one of the big four accounting firms to review the documentation and fund flows, an outside IT security firm to audit the smart contract that creates the security tokens, and a qualified custodian to create the crypto wallet service.

And while the project is the first institutional-grade offering available to any accredited investor, it’s not the first blockchain real estate sale in the U.S. Back in August 2018, the luxury St. Regis hotel in Aspen, Colorado, announced a plan to sell real estate tokens in partnership with the crowdfunding site Indiegogo.

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